Flying Together: The Turbulent History of the oneworld Airline Alliance

Post originally Published February 2, 2024 || Last Updated February 3, 2024

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Flying Together: The Turbulent History of the oneworld Airline Alliance - - Birth of an Alliance

Flying Together: The Turbulent History of the oneworld Airline Alliance

The seeds of the oneworld airline alliance were first planted in the 1990s as major carriers around the globe grappled with a rapidly evolving aviation landscape. Deregulation, privatization, and the rise of budget airlines were dramatically increasing competition. Legacy flag carriers suddenly found their dominance threatened.

In this turbulent environment, talks began between American Airlines, British Airways, Qantas, and Cathay Pacific about forming a global partnership. After years of negotiations, the "Big Four" finally cemented their plans in February 1999 and announced the official launch of oneworld.

The core aim was to link the route networks and frequent flyer programs of these leading airlines. This would provide valuable connectivity and benefits to customers, especially high-yield business flyers. Oneworld was the last of the three major global alliances to form, following Star Alliance in 1997 and SkyTeam in 1998.
At its inception, oneworld's muscle was centered on North America and Asia-Pacific. American Airlines provided a vast domestic U.S. network while British Airways ruled the skies over the United Kingdom and Europe. Qantas controlled the important Australia-Europe market with a stopover in Asia, where Cathay Pacific was dominant.

Finnair and Iberia also joined as initial members, expanding reach into northern and southern Europe. The alliance was off to a strong start with over 200 destinations in more than 50 countries. Member airlines served 548 million passengers annually.
Yet beyond this impressive scale, the defining feature of oneworld was its emphasis on network connectivity and service quality over mere size. The alliance aspired to create a more seamless, premium experience for global travelers than rival groups.

Oneworld architect Robert Crandall proclaimed: "We need to get our arms around what it means to take care of a customer, rather than just aligning networks...We want to make interline travel less painful and more convenient."

What else is in this post?

  1. Flying Together: The Turbulent History of the oneworld Airline Alliance - - Birth of an Alliance
  2. Flying Together: The Turbulent History of the oneworld Airline Alliance - - Early Turbulence and Departures
  3. Flying Together: The Turbulent History of the oneworld Airline Alliance - - Expanding Across Continents
  4. Flying Together: The Turbulent History of the oneworld Airline Alliance - - weathering Economic Storms
  5. Flying Together: The Turbulent History of the oneworld Airline Alliance - - Facing Competition Head On
  6. Flying Together: The Turbulent History of the oneworld Airline Alliance - - Loyalty Programs Interlink
  7. Flying Together: The Turbulent History of the oneworld Airline Alliance - - Standardizing the Customer Experience
  8. Flying Together: The Turbulent History of the oneworld Airline Alliance - - Looking to the Future Skies

Flying Together: The Turbulent History of the oneworld Airline Alliance - - Early Turbulence and Departures

Just months after launch, founding member Aer Lingus withdrew to pursue an independent strategy. This small but symbolic exit foreshadowed ongoing struggles to reconcile disparate business models. Then 9/11 devastated global aviation, dealing a huge blow to ambitious visions of worldwide cooperation.

As oneworld slowly recovered, internal fractures emerged over competitive expansion and antitrust immunity. Heated disputes arose between American Airlines and British Airways over new routes, which threatened to break up the partnership.

Regulators eventually granted antitrust immunity to the pair, allowing coordination on flights between North America and Europe. But this was soon followed by British Airways and Iberia merging into International Airlines Group in 2011.

The creation of this mega-carrier sparked tensions within oneworld, as it shifted the balance of power away from American Airlines. However, the U.S. giant managed to block Iberia from joining the transatlantic antitrust deal.
Around this time, founding members Qantas and Cathay Pacific also grew restless, unveiling plans to launch a joint Asia-Pacific alliance with anti-trust immunity. Although it never materialized, this threatening overture revealed cracks in oneworld unity.

Losing Qantas was a massive blow, as it had formed the alliance's core Australia-Europe link. For travelers worldwide, it was the end of popular Kangaroo Route stopovers in Singapore, Bangkok, and Hong Kong.
The shaken partners tried convincing Qantas to reverse the decision, but ultimately sought new options like Qatar Airways. In a troubling trend, network priorities were shifting from oneworld to bilateral ties and external joint ventures.

While still reeling from Qantas' departure, oneworld suffered further misfortune just a year later. Citing unpredictable finances, cash-strapped Hungarian carrier Malev collapsed overnight, abandoning both oneworld and Budapest hub operations.

Flying Together: The Turbulent History of the oneworld Airline Alliance - - Expanding Across Continents

One of oneworld’s core objectives has always been to link key regions worldwide through its member airlines. During the 2000s, the alliance pursued an aggressive expansion strategy to widen its global footprint. By recruiting partners across continents, oneworld aimed to capture strategic markets and build a truly global network.
This growth was vital to compete with rival alliances and serve customers across more destinations. Star Alliance and SkyTeam were racing to add airlines and countries, so oneworld needed to keep pace. Expanding in key regions also enabled members to feed more traffic to each other’s hubs.

Adding Dragonair (Cathay Pacific’s subsidiary) extended oneworld’s presence across secondary cities in China during 2007. Then in 2009, Russia’s S7 Airlines made Moscow available as a hub for alliance partners. This growth continued in 2010 with airberlin and Russia’s largest domestic carrier Yakutia Airlines joining the team.
One massive milestone came in 2011 when oneworld announced both Malaysia Airlines and airberlin would come on board. Suddenly, the alliance gained major footholds in two key regions – Southeast Asia and continental Europe. Malaysia’s hub opened up connections across Asia, linking vital emerging markets. Meanwhile, airberlin’s Berlin and Dusseldorf bases expanded access to cities across Germany and neighboring countries.

The same year, oneworld also welcomed SriLankan Airlines, securing South Asia as the Indian subcontinent rapidly developed. Expanding on this, Qatar Airways joined during 2013, connecting the alliance to the booming Middle East. These additions expanded oneworld’s reach to almost 1,000 destinations in 150 plus countries.

While oneworld made strides across continents, North America also received attention. Mexicana joined in 2009, offering connections south of the border and into Latin America. The alliance later brought onboard merger partners MexicanaClick and MexicanaLink, consolidating power in Mexico.

Additionally, oneworld gained Canadian carrier Air Canada through a unique “Alliance within an Alliance” agreement with founding member British Airways. Alongside member elect US Airways, the alliance strengthened its position across most key regions.

Flying Together: The Turbulent History of the oneworld Airline Alliance - - weathering Economic Storms

The late 2000s and early 2010s were an extremely challenging period for the aviation industry. As oneworld expanded its reach across continents, external shocks repeatedly tested the resilience of the partnership. From financial crises to natural disasters, the alliance was battered by a string of crises that impacted travel demand and airline finances.

When the 2008 Global Financial Crisis erupted, premium travel plummeted as corporations drastically cut travel budgets. Oneworld members faced sharp declines in lucrative business class sales. American Airlines posted losses of $2.1 billion in 2008, while Iberia and airberlin were also hit hard. Partners were forced to slash unprofitable routes and capacity.

Just as oneworld airlines stabilized, spiking oil prices in 2011 pushed fuel expenditures to over one-third of operating costs. This squeezed margins during a fragile recovery. Then in 2010, Iceland’s Eyjafjallajökull volcano had disrupted transatlantic flights for weeks as hazardous ash drifted through European skies.
Natural disasters also took a heavy toll on the alliance. In 2011, earthquakes and tsunamis battered Japan, taking a major economic toll and reducing travel demand dramatically. Cathay Pacific and Qantas were impacted by their large Japan-connected networks. Flooding in Thailand further dampened Asian demand in 2011.
With oneworld reeling, the 2012 Euro crisis kicked off as fears grew that the Eurozone could collapse. Portugal, Italy, Greece and Spain teetered near bankruptcy. Corporate travel slumped once again as instability rocked the bloc. Iberia and airberlin suffered, forcing unprofitable capacity cuts.

By mid-2012, a "perfect storm" of crises left oneworld struggling with falling revenues, soaring fuel costs, depressed premium demand, and reduced connectivity needs. Partner cooperation was strained. However, collective determination to outlast challenges ultimately strengthened commitment to the alliance.
During this bleak period, oneworld showed its value as partners supported each other financially where possible. Additional focus was placed on joint sales and ground services to reduce costs. The alliance also provided a framework for coordinating schedules and capacity.

By maintaining key links between members through the crises, oneworld ensured airlines could ramp up connections again as conditions improved. The alliance helped carriers survive the storm without compromising the core passenger experience or long-term network viability.

Flying Together: The Turbulent History of the oneworld Airline Alliance - - Facing Competition Head On

While expanding its global presence, oneworld also faced intensifying competition head on as rival alliances aggressively added members. Star Alliance snagged major players like Singapore Airlines, while SkyTeam signed China Southern and China Eastern. The fast-growing Gulf carriers also emerged as threats.
With its future in the balance, oneworld made competitive recruitment a top priority in the 2010s. The alliance targeted key airlines to block competitors and fortify weak points in its network. After losing strategic partners like Qantas, plugging holes was vital.

Landing tier-one global carrier JAL in 2013 was a massive competitive coup, providing enhanced Asia connections and keeping the Japanese giant from Star Alliance. But even bigger was securing LATAM Airlines in 2015, after the Chilean-Brazilian giant left Star. This greatly expanded oneworld's presence across South America.
Following JAL and LATAM, the alliance recruited Malaysia's AirAsia X, adding a key budget airline to link Southeast Asia with Australia and Japan. The alliance also strengthened links to mainland China by bringing Sichuan Airlines into the fold.

Oneworld further focused on linking members to critical growth markets in Asia and Latin America which offered huge potential. Capitalizing on LATAM's powerful position in Latin America, American Airlines launched new routes connecting to the region.

Qatar Airways also strengthened ties with LATAM, SriLankan, Cathay Pacific and others to expand reach into key Asian destinations. Joint ventures were later launched between Qantas-JAL, British Airways-JAL and IAG-LATAM to optimize cooperation in vital regions.
In Europe, the alliance bolstered its standing by bringing in TAP Air Portugal. Not only did TAP cover Portugal, but its Brazil links provided South American growth. Adding Vueling also expanded options for connecting across Europe on budget flights.
By aggressively targeting competitive pressure points, oneworld gave its members openings to launch new non-stop routes that linked into partner hubs worldwide. This extended the alliance's combined network and relevance.
Rivalry also brewed as global alliances encroached on each others' territory with new recruits. Oneworld penetrating Star's stronghold in South America with LATAM ignited serious tensions. But by expanding options for customers, this ultimately benefited travelers.

While joining forces expanded reach, oneworld aimed to also connect the loyalty programs of member airlines. This was a strategic priority, as frequent flyer perks are invaluable for retaining high-value customers and driving repeat business.

By interlinking programs, oneworld helped ensure that elite status travelers would enjoy top-tier perks and priority services when flying across the combined network. Suddenly corporate road warriors could seamlessly earn and redeem miles with multiple carriers.

The cornerstone of this approach was linking tier status across all partner airlines. Under oneworld, elite members would be recognized and granted priority access to lounges, special check-in, and upgrades when traveling on any alliance partner worldwide.
This was a game changer in smoothing the journey for globe-trotting business flyers. One qualified itinerary could count towards status on multiple airlines. A business traveler might reach American's top-tier Executive Platinum level faster by including flights on Cathay Pacific or Japan Airlines.

Once earned, that status opened the door to premium perks across the alliance's network. No longer did road warriors have to start from scratch with every new airline. It made loyalty rewarding, even when mixing partners.
Also revolutionary was enabling members to redeem and earn miles across all frequent flyer programs. A passenger could now put Qantas miles earned down under towards American Airlines seats over the Pacific.

Aligning elite tiers and benefits built strong loyalty by offering a standardized premium experience worldwide. While using your preferred airline was always best, oneworld ensured you were still treated well on partners.

Access to more airport lounges and fast-track security gave road warriors an oasis on every journey. And instant top-tier recognition removed the stress of starting at the bottom with other carriers.
By seamlessly integrating mileage plans and status benefits, oneworld transformed loyalty from an individual program to an alliance-wide privilege. Frequent flyers now enjoyed elite treatment across an unrivaled global network.
The strategic importance of interlinking perks and benefits cannot be understated. These captive premium customers delivered major revenues for member airlines. Oneworld ensured their loyalty by making status truly worldwide.

Flying Together: The Turbulent History of the oneworld Airline Alliance - - Standardizing the Customer Experience

While oneworld worked on integrating back-end infrastructure like loyalty programs, the alliance also focused on standardizing the customer experience across member airlines. This effort aimed at smoothing out pain points for travelers flying on multiple oneworld partners in a single trip.

Despite being in the same alliance, each airline had its own procedures, rules, and service philosophies. For customers, this meant dealing with a maze of confusion as standards and expectations varied wildly between carriers. Even simple things like baggage policies and boarding zones differed, creating headaches.
Realizing this fragmented experience eroded oneworld’s brand promise of seamless global travel, the alliance pushed carriers to harmonize key customer touchpoints. Though difficult given the autonomy of massive airlines like British Airways and American, progress was made to unify policies where possible.

One big achievement was standardizing baggage rules and fees within North America and Europe. This removed nasty surprises for passengers connecting across oneworld partners, as free checked bag allowances, carry-on sizes and overweight charges were aligned.

The alliance also established common branding and signage across key airports to clearly identify oneworld facilities. Dedicated check-in areas were designated to better direct customers on multi-airline journeys. Premium passengers especially benefitted from smoother lounge access.
Partners collaborated on a oneworld tiered frequent flyer program to ensure elite members received guaranteed priority services regardless of which carrier they flew. This involved training staff to recognize status and provide expedited check-in, security access, and boarding.
While onboard service philosophies still varied between full-service and budget members, the alliance pushed for certain minimum standards around food, drinks, entertainment, and amenities. This helped avoid stark disparities between long-haul and short-haul legs.
By taking a systems approach, oneworld aimed to eliminate pain points across the entire end-to-end journey - from booking to baggage claim. Creating more seamless airport, lounge and onboard experiences was key to delivering brand promises.
Despite challenges meshing divergent systems, the net benefit of smoother journeys increased loyalty across the combined oneworld network. Fewer frustrations meant customers were more likely to book future travel on member airlines.

Flying Together: The Turbulent History of the oneworld Airline Alliance - - Looking to the Future Skies

As oneworld approaches its third decade, the alliance remains focused on providing premium global connectivity and a smoother customer journey into the future. While rival alliances aggressively recruit Chinese carriers and grab headlines with merger deals, oneworld is taking a more selective approach to long-term growth. The alliance seems intent on doubling down on quality over quantity as competition intensifies.
Oneworld recently strengthened collaboration between its powerhouse partners in key regions. British Airways and Iberia launched joint business agreements with Qantas and Japan Airlines on vital Europe-Asia routes. This builds on their existing cooperation with American and Finnair across the Atlantic. Deeper coordination between these global giants aims to optimize schedules, pricing, and sales opportunities.

However, oneworld risks falling behind rivals in China due to its limited mainland presence. Competitors have added China Southern, China Eastern, Air China and Shenzhen Airlines. Oneworld has gained lower-profile Sichuan Airlines and Cathay Dragon from Hong Kong. Anxious members are pressuring leaders to recruit a mainland Chinese partner to remain relevant.

Insiders suggest China Southern would be an obvious addition, but politics make this challenging. Oneworld seems unwilling to ruffle the feathers of an already disgruntled Qantas, which is re-establishing its presence in China since ending its joint venture with Emirates.

There is also speculation that oneworld may look to tap growing legions of budget-conscious travelers by bringing onboard a major low-cost carrier like IndiGo or AirAsia. Doing so could help stimulate feeder traffic to full-service partners.

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